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Buying a Condo? All Homeowners Dues are Not Created Equal Print E-mail
(6 votes, average 5.00 out of 5)
House - Buying Real Estate
Written by Ahmed Amr   
Thursday, 08 April 2010 02:36
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I remember buying my very first condo. I’d researched everything, had an inspector check the unit and did a really good job getting the best financing possible on a conventional loan. I knew Condosenough to have a 20% down payment to avoid paying Private Mortgage Insurance and score a lower rate. That was back in 1983 when interest rates on a thirty year fixed mortgage were running around 13%. I took a chance and went for a variable loan that re-priced every six months and had the lowest spread to the underlying index. But it came with no ceiling rate which meant if the underlying index went to 25% - I’d have to go along for the ride. That was a huge risk back then, and even though I was certain that rates were going down, I can’t say it didn’t keep me up nights. And while I was busy figuring out every possible angle, I almost sent my agent to an insane asylum. By the time I put in an offer, we must have looked at fifty properties - twice. I thought I had everything covered. But there was one thing that I didn't get quite right - the homeowners' dues.

One of the things I was looking for was low monthly dues. This particular condo came with a $49 monthly payment to the Homeowners association that covered garbage, water, sewer and taxes plus insurance on the building. Aside for my mortgage payment and the real estate tax, the only other monthly expense I had was the $49 check I wrote to the homeowners’ association.

The reason the dues were so cheap was because the 12 unit building had ‘work parties.’ We’d all pitch in with the maintenance and help take care of the lawn. The building was self managed and, all in all, I have to say I spent fifteen of the best years of my life there. Because we all were so cooperative, we ended up creating an environment that was akin to a little urban village.

The complex was made up of twelve charming Anhalt designed townhomes built around a garden courtyard and it turned out to be a mini village of cheapsters - my kind of people. The bad news was that they were so tight fisted that they tended to neglect or defer some of the big stuff - like the roof and the plumbing. The low dues also meant the association didn’t have much in the way of reserves. So, when something big had to be done - the way they financed it was by levying assessments. And sure enough, the second month I moved in, I was invited to my very first meeting and they decided to re-plumb the entire complex with copper pipes. Not only that - the cost of patching up any damages to the bathroom or the kitchen had to be paid for by the owners of each unit - which meant a mandatory tiling job around the tub and the kitchen sink.

My point is that not all home owners’ dues are created equal. If you’re just shopping for the lowest dues, you might end up getting what you paid for.

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flamaest |2010-07-12 11:54:59
Right, you should always avoid HOAs IMHO. I have not met one single person who say they love their HOA with a smile on their face.

I'll pay my own bills [if I so choose], thank you.

Condos and even large house suburbs without HOAs do exist, but you need to look for them, even if it means trying another state.

2 cents,
Liz Beckett  - Great Tips! |2010-04-08 06:43:45
Great Tips...

I just bought my first condo, and have been living here two years now, and wanted to add a couple...

- Try calling the management company before you buy. If you can't get through to them, or they won't call you back, that should be a big red flag. Unresponsive management company really sucks when you need to get help with an issue, as a resident!

- Having more services in your HOA fee isn't always great, because you can't get rid of them if you don't like the service. Want to ditch your cable company and go with OTA TV? Too bad, you can't stop paying them. In my case, the exterminater under contract with my HOA is incompetent, and I have to pay another company to come treat my townhouse... so essentially, I pay for two exterminators.

Just a couple things that have bugged me since moving in here! Thanks...
frugal nomad |2010-04-08 07:35:06
It's definitely a learning experience. I've owned four different condos and when it came to Home Owners Dues, they were all so different in what they covered. You definitely can't pick and choose the bundled 'services' that are included. Just like you can't ask for a discount because you don't use that swimming pool.

One thing is certain - self-managed condo compounds can save a bit of money because they don't have to pay professional management fees. And most self-managed condo properties are small - under 12 units and have no facilities like pools or clubs. Those two factors alone make a huge difference in the amount of dues you pay. Smaller complexes also tend to have a better sense of community where everybody knows their neighbor. Some of the best friends I've ever had - I met at the condo next door.
Liz Beckett |2010-04-11 19:49:42
Hi Frugal Nomad!

Yes - I knew going in that I couldn't get a discount if I didn't use all the services, but...

If I had to do it all again, I think I'd look for someplace that provided less services (and had a cheaper fee). It kind of stinks when the services that they DO provide are subpar (ie the ineffective exterminator!) but you have to pay for them anyway, THEN pay for someone else to come do the job right!

I have never heard of "self managed" condos - they actually sound really cool... I wonder if they're more popular in certain regions? (I'm in the Atlanta area.)

It makes sense that you'd have more community in a group like that (and that you could have a better living experience). My townhouse/condo has at least 180 units (!) - but only 20-30 people show up for the annual meetings! Kind of crazy, and sad!
frugal nomad  - self-managed condos |2010-04-11 20:13:50
A lot of the smaller complexes are self-managed. That's why I'm very partial to any complex that's 12 units or under. In Seattle, I've actually seen two and three unit condos. Basically a duplex that has been converted to two condos. It's not that unusual to find six unit condos. For the most part, they tend to be self-managed and provide no facilities like swimming pools - at least in the North West. The downside is they might assign you a day to water the lawn or cut the grass or have work parties to touch up the paint or get multiple bids for the roof. In a self-managed unit, everybody chips in. It's like barn raising. And then you have a party but they usually serve stuff stronger then lemonade.

I'm sorry, I wouldn't even rent in a complex with 120 units. For one thing, I like to know my neighbors - all of them - at least well enough to exchange a casual greeting. One of the great benefits of home ownership is a sense of community. Just to give you an idea, when you have a meeting in a twelve unit complex - expect at least 11 people to show up. Of course, they'll have 13 opinions but you get to work it out.

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